Air Transport World

Europe.(WORLD AIRLINE REPORT)(Company overview)


The Greek carrier, which listed 25% of its share capital on the Athens Stock Exchange last July, raising [euro]136 million, is establishing itself firmly as the country's leading airline. It is the second-largest carrier at Athens Eleftherios Venizelos and the largest at Thessaloniki. Passenger boardings rose 18% to 5.2 million in 2007. Domestic traffic increased 10% to approximately 3.4 million while enplanements on its growing international network were up 35% to 1.9 million. It reported a strong improvement in financial results for the year as total revenue climbed 20% to [euro]482.7 million and net income jumped 39% to [euro]35.8 million.


Aegean introduced new direct flights from Athens to Frankfurt and Munich and increased frequencies to Milan, Sofia and Bucharest. This summer it is operating 17 international routes to 12 destinations in nine countries. It added a twice-daily to London Stansted and a daily to Tirana. Its domestic network covers 23 routes and 17 destinations.

The airline, which sticks to its full-service concept, commenced its fleet renewal process as it took delivery of its first three new A320s and exercised options for an additional two A321s with delivery in 2009, lifting its firm orders to 27 A320 family aircraft. This year it is scheduled to take 10 of them. It decided to speed up the phase-out of its 15 older 737s between the fourth quarter and June 2009. Passengers carried in the first quarter of the current FY rose 10% on the year-ago-period to 1.1 million.


Citing unprecedented" fuel costs, the weak US dollar and a slowing economy, the Irish carrier in June said it will reduce its long-haul capacity by 15% for the 2008-09 winter season and warned that based on current fuel prices and the uncertain economic outlook it expects a breakeven result for 2008 "at best." It also decided to take two A330s out of service in 2009 when it takes delivery of two new A330s, keeping the fleet to nine rather than expanding to 11 as had been planned.

The turn of events is a setback for EI, which returned to profit last year, earning [euro]105.3 million ($154.8 million) compared to a net loss of [euro]69.9 million in 2006 (ATW, 6/08, p 42). ROI was 19.7%, several points above its long-term 15% target. In a busy 2007, EI fought off a hostile takeover attempt by Ryanair with help from the Irish government and the European Commission, although at press time it was EI's largest shareholder with 29.3%, followed by the Irish Ministry for Finance with 25.2%. EI's lawsuit to force Ryanair to sell its stake was rejected in March by the European Court of First Instance.

EI also opened its first international base at Belfast International in December despite a strike threat from its pilots. As it was allowed to take early advantage of the EU-US open skies agreement, it opened three new US gateways in the second half of 2007: Washington Dulles, San Francisco and Orlando International. It did pull its service to Dubai, its first Mideast destination, which it commenced in March 2006, earlier this year. And it plans to suspend its Dublin-Los Angeles service from November.

It initiated a Web-based linkage with JetBlue Airways and signed a codeshare agreement with United Airlines under which UA will add its code on all EI routes from Ireland to the US from Nov. 30.

At the end of February it exercised rights to purchase four A320s for delivery in 2010 and 2011. In April it confirmed the order placed in June last year for six A350 XWBs and six A330-300 Enhanced aircraft. A330 deliveries are scheduled to begin next year.


The Russian flag carrier continued to reveal its intention to play a more significant role globally, committing to a long-haul fleet renewal while expressing interest in consolidation on several European fronts.

Aeroflot celebrated its 85th birthday in February and has big plans for the future, starting with its $3.6 billion order for 22 787s sealed last fall. It will fill the gap with 10 A330-200s leased from AerCap Holdings that are scheduled to begin delivery in November. It continues to add to its A320 fleet--it plans to take 11 this year--and said on the occasion of its anniversary that it plans to increase its fleet from the 83 aircraft it operated in March to 150 by 2015. It completed retirement of its Tu-134s in January.

In addition to new airplanes, SU has its eye on other airlines. In the past year it has discussed acquisition or investment in Alitalia, Jat Airways, CSA Czech Airlines and Austrian Airlines with varying degrees of interest. Aeroflot bid for the Italian carrier last fall during an initial offer by the government for its 49.9% stake in loss-making AZ but pulled out in November. Recently elected Prime Minister Silvio Berlusconi attempted to reopen the talks in April and met with Russia's then-President Vladimir Putin, but nothing concrete appeared to result. SU CEO Valery Okulov also revealed his interest in Jat and CSA and the airline reportedly talked briefly with Austrian before deciding against an investment.

While specific plans remained unclear at press time, Aeroflot is committed to expanding its reach. Okulov said consolidation is "in the pipeline" and "tactical partnerships and foreign airline acquisitions are crucial to enlarge the network ... the major focus for expansion will be on the European aviation market with anticipated acquisitions of a European air carrier."

SU transported more than 8 million passengers in 2007, up 12% from 2006, and said it is targeting 9.5 million this year. Its profit through the first nine months of 2007 nearly doubled from the year-ago period to $357.3 million according to International Financial Reporting Standards.


Air Berlin Group now runs a clear second behind Lufthansa in Germany, having consolidated its position with the acquisition of LTU and Condor Airlines last year and its 2006 purchase of dba. Integration has proved costly, however, as AB's 2007 profit plunged to [euro]11 million ($16.2 million) from [euro]50.1 million in 2006.

Fortunes improved somewhat in the first quarter of 2008 as the company narrowed its loss by 11% to [euro]59 million thanks to rising sales and fuel hedges, but it admitted that its full integration with LTU has been "delayed." According to CEO Joachim Hunold, it remains committed to adapting to tough market conditions with a program including capacity adjustments and "elimination of unprofitable flight routes." It launched a five-times-weekly Dusseldorf-Beijing-Shanghai service in early May, its first long-haul route, but reduced it to thrice-weekly just three weeks later.


Despite its cost, expansion remains AB's intention. It revealed its long-haul ambition with an order for 25 787-8s last July and contracted with ILFC for the lease of three more. It also is looking to enhance its MRO profile through the newly combined Air Berlin Technik, which actively will seek third-party work.

The company introduced a new livery in January, altering its red-and-white scheme and placing a new "a" logo on the tail.


The Franco-Dutch group in December announced that it reached an accord to acquire VLM Airlines, the largest carrier at London City (see VLM). But its interest in consolidation of the European airline industry did not end with the regional, as it bid on Alitalia but ultimately withdrew the offer in the face of strong opposition from that carrier's unions.

While not successful with AZ, AF KLM managed to increase its weight on the North Atlantic. It was the first European airline to take real advantage of the EU-US open skies agreement by launching a daily service from London Heathrow to Los Angeles on March 30. It participated in a slot shuffle at LHR, giving its US SkyTeam partners the opportunity to launch transatlantic services and some months earlier it announced the creation of a of 50-50 JV with Delta Air Lines to share revenues and costs on their transatlantic operations.

More good news came in April when the US Dept. of Transportation granted transatlantic antitrust immunity to SkyTeam partners Delta, Northwest Airlines, Air France, CSA Czech Airlines, Alitalia and KLM, allowing the six to coordinate their transatlantic fares, services and capacity as if they were a single carrier in these markets.

Financially, the group did well with an operating margin of 6.7% for the fiscal year ended March 31, up 0.4 point on the prior year. Consolidated net profit came in at [euro]748 million ($1.17 billion), a 16% decline from the [euro]891 million earned in the prior year as it booked a [euro]530 million provision to cover possible penalties arising from the ongoing antitrust probe into airline cargo activities. Excluding exceptional items, earnings rose 11% to [euro]987 million. Revenue was ahead 6% to [euro]24.1 billion and operating costs climbed 4% to [euro]22.7 billion. Operating profit increased 13% to [euro]1.41 billion from [euro]1.24 billion in 2006-07.

Air France in January unveiled a new interior on its narrowbody fleet featuring "a host of aesthetic and practical new features" including larger overhead baggage bins, new ceilings/lighting, trim that appears to widen the windows and renovated passenger controls. The group also announced the launch of a new cabin class on both AF's and KLM's long-haul fleet in winter 2009-10 catering to SMEs, the elderly and leisure travelers seeking more comfort.

KLM in February took delivery of its first 777-300ER as part of a November order for two-300ERs and three 737-700s, while AF's 50th 777 joined the fleet in May. AF is launch customer for the 777F and expects to take delivery of the first of the type in the fourth quarter. …

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